The high-stakes game of chicken continues between Wall Street money managers (MMs) and Reddit/WSB-led retail investors. Retail is taking an absolute beating: since Friday’s column, GME has plummeted ~80 per cent from its $480 peak to ~$90 USD. Other stocks like AMC, Nokia (NOK), and BlackBerry (BB) have similarly sunk by 50 per cent. Knowing they are running out of time before the inevitable short squeeze occurs, the MMs have desperately been using every underhanded tactic they have at their disposal..Despite the daily body blows, retail investors are holding their shares and refusing to sell..From January 28 to February 2 – through naked market manipulation – the MMs dominated the trading momentum. Retail refused to yield and called the MMs’ bluff. The price drops were manufactured; trading volumes had fallen ~80 per cent: from ~180 million shares a day to ~40 million (for GME). It has become a battle of attrition: can retail investors remain unified longer than MMs can remain solvent (MMs are down $19.75 billion on their GME short positions)?.Bloodied, bludgeoned, and bruised, WSB investors defiantly rose up on Wednesday to end the day green across the board (GME +2.41 per cent; AMC +14.71 per cent; BB +3.90 per cent; NOK +3.75 per cent)..Are retail investors stubbornly committed to a failing cause, or is there an actual path to victory? Some personalities, like Mark Cuban, are confident the short squeeze has not even begun, explaining that recent price drops are the clear result of MMs restricting retail buying power in order to reduce demand..Others note that the prices are already recovering as retail investors switch to new trading platforms without unfair trading restrictions (including completely new users who have never invested before in their lives and have been inspired to join the fight)..As I discussed on The Canadian Story podcast recently, it comes down to which side of the short squeeze graph we are on. The chart below depicts the infamous 2008 short squeeze of Volkswagen (VW) stock – “the mother of all short squeezes”. Because Porsche had bought so many VW shares in order to facilitate a takeover, there were not enough shares available on the market for MMs to buy to cover their short positions (when you short a stock, you borrow a share from someone who owns one and have to give it back by a certain date, hoping you sell the share for less than you bought it so you can keep this difference as profit).. VK-market .This first caused VW stock to double in price, from less than €200 to €400, before plummeting sharply back to €200, and then… the real squeeze happened. Overnight, VW skyrocketed to nearly €1,000. MMs lost $30 billion (and in the midst of the global economic recession). .Cuban and WSB believe we are at that first major dip (to the left of the price spike) and that the actual squeeze is yet to even begin. There is merit to their argument; MMs still have ~120 per cent of available GME shares shorted. They have only been able to reduce their positions by about 8 per cent in the past few days. .Yet, the MMs have had the mainstream media committed to a now week-long misinformation campaign, trying to convince the public that the fun is over and that it’s time to take your casino winnings and leave the table before you get hurt. This weekend, the MMs and media tried to trick retail into diluting their purchasing power by falsely claiming WSB believed GME was over and that silver bullion was the “next play”. This tricked some people, and sure enough, silver related prices jumped 20-50 per cent at Monday market open (all of these gains evaporated by Wednesday, with silver futures even trading ~10 per cent lower)..WSB is a decentralized rag-tag online community. It may have more prominent users, but there are no true leaders. There is no real organization or ability to reliably focus the group on any particular stock. More importantly, the vast majority of its users, and those following through social media – particularly Twitter – are participating to send a message to Wall Street, not to make money. Check out WSB’s Reddit page and decide for yourself..Despite the unprecedented political unity against Wall Street on this issue (Congressional hearings to be held February 18), the Securities Exchange Commission (SEC) appears to again be more interested in protecting their own than actually maintaining a free and fair market. The SEC is apparently launching investigations into WSB to see if they can identify any users “taking advantage”, engaging in “manipulative behaviour”, or “creating hype”..In the midst of such blatant market manipulation by the MMs and the media, including the 48-hour silver “pump-and-dump” scheme, the SEC believes WSB are the real villains. When Jim Cramer, CNBC, or major bank analysts tell the public to buy or sell a stock, no problem. When a few Reddit trolls do it, the SEC is on it..From the beginning, I have been calling attention to the deceptive manner in which the mainstream media has been framing the actions of WSB versus that of the MMs. On these SEC investigations, Bloomberg made a token mention that the SEC was also looking into the MMs but not for “manipulative behaviour” or “taking advantage” but rather how they “handled” the situation and whether they “complied” with the rules. Language is important..The MMs and their allies have invested all their efforts into winning this fight. They are telling you that it’s over, to stay down. But the math is not on their side, and WSB reinforcements are coming. Hey Wall Street, I didn’t hear no bell..Andrej Litvinjenko is the Financial Columnist for the Western Standard
The high-stakes game of chicken continues between Wall Street money managers (MMs) and Reddit/WSB-led retail investors. Retail is taking an absolute beating: since Friday’s column, GME has plummeted ~80 per cent from its $480 peak to ~$90 USD. Other stocks like AMC, Nokia (NOK), and BlackBerry (BB) have similarly sunk by 50 per cent. Knowing they are running out of time before the inevitable short squeeze occurs, the MMs have desperately been using every underhanded tactic they have at their disposal..Despite the daily body blows, retail investors are holding their shares and refusing to sell..From January 28 to February 2 – through naked market manipulation – the MMs dominated the trading momentum. Retail refused to yield and called the MMs’ bluff. The price drops were manufactured; trading volumes had fallen ~80 per cent: from ~180 million shares a day to ~40 million (for GME). It has become a battle of attrition: can retail investors remain unified longer than MMs can remain solvent (MMs are down $19.75 billion on their GME short positions)?.Bloodied, bludgeoned, and bruised, WSB investors defiantly rose up on Wednesday to end the day green across the board (GME +2.41 per cent; AMC +14.71 per cent; BB +3.90 per cent; NOK +3.75 per cent)..Are retail investors stubbornly committed to a failing cause, or is there an actual path to victory? Some personalities, like Mark Cuban, are confident the short squeeze has not even begun, explaining that recent price drops are the clear result of MMs restricting retail buying power in order to reduce demand..Others note that the prices are already recovering as retail investors switch to new trading platforms without unfair trading restrictions (including completely new users who have never invested before in their lives and have been inspired to join the fight)..As I discussed on The Canadian Story podcast recently, it comes down to which side of the short squeeze graph we are on. The chart below depicts the infamous 2008 short squeeze of Volkswagen (VW) stock – “the mother of all short squeezes”. Because Porsche had bought so many VW shares in order to facilitate a takeover, there were not enough shares available on the market for MMs to buy to cover their short positions (when you short a stock, you borrow a share from someone who owns one and have to give it back by a certain date, hoping you sell the share for less than you bought it so you can keep this difference as profit).. VK-market .This first caused VW stock to double in price, from less than €200 to €400, before plummeting sharply back to €200, and then… the real squeeze happened. Overnight, VW skyrocketed to nearly €1,000. MMs lost $30 billion (and in the midst of the global economic recession). .Cuban and WSB believe we are at that first major dip (to the left of the price spike) and that the actual squeeze is yet to even begin. There is merit to their argument; MMs still have ~120 per cent of available GME shares shorted. They have only been able to reduce their positions by about 8 per cent in the past few days. .Yet, the MMs have had the mainstream media committed to a now week-long misinformation campaign, trying to convince the public that the fun is over and that it’s time to take your casino winnings and leave the table before you get hurt. This weekend, the MMs and media tried to trick retail into diluting their purchasing power by falsely claiming WSB believed GME was over and that silver bullion was the “next play”. This tricked some people, and sure enough, silver related prices jumped 20-50 per cent at Monday market open (all of these gains evaporated by Wednesday, with silver futures even trading ~10 per cent lower)..WSB is a decentralized rag-tag online community. It may have more prominent users, but there are no true leaders. There is no real organization or ability to reliably focus the group on any particular stock. More importantly, the vast majority of its users, and those following through social media – particularly Twitter – are participating to send a message to Wall Street, not to make money. Check out WSB’s Reddit page and decide for yourself..Despite the unprecedented political unity against Wall Street on this issue (Congressional hearings to be held February 18), the Securities Exchange Commission (SEC) appears to again be more interested in protecting their own than actually maintaining a free and fair market. The SEC is apparently launching investigations into WSB to see if they can identify any users “taking advantage”, engaging in “manipulative behaviour”, or “creating hype”..In the midst of such blatant market manipulation by the MMs and the media, including the 48-hour silver “pump-and-dump” scheme, the SEC believes WSB are the real villains. When Jim Cramer, CNBC, or major bank analysts tell the public to buy or sell a stock, no problem. When a few Reddit trolls do it, the SEC is on it..From the beginning, I have been calling attention to the deceptive manner in which the mainstream media has been framing the actions of WSB versus that of the MMs. On these SEC investigations, Bloomberg made a token mention that the SEC was also looking into the MMs but not for “manipulative behaviour” or “taking advantage” but rather how they “handled” the situation and whether they “complied” with the rules. Language is important..The MMs and their allies have invested all their efforts into winning this fight. They are telling you that it’s over, to stay down. But the math is not on their side, and WSB reinforcements are coming. Hey Wall Street, I didn’t hear no bell..Andrej Litvinjenko is the Financial Columnist for the Western Standard
